The Dot-Dinero Era: Indulging in New Vanity Domains Comes at a High Price

By: David A.W. Wong - Associate, Barnes & Thornburg LLP

Categories: Business Law, Technology

When the ".com" top-level domain (TLD) was first introduced nearly 25 years ago, domain name options seemed endless. Unless, of course, the domain your company wanted had been purchased. As early as next year, the largest expansion of domain names is set to begin, marking a prime opportunity for businesses to reinforce and strengthen their online presence with a slew of new domains—from .nike to .shoe. But this new Internet “real estate” is expected to come at a steep price.

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Although .com was originally intended to designate domain names owned by commercial entities, the .com TLD quickly became the most popular domain for businesses, individuals and non-commercial entities alike. Cybersquatters, those who purchase and often profit from sought-after domains, and legitimate business owners have fought to stake their claims and gobble up relevant .com domains. Despite attempts to introduce other TLDs over the last two dozen years to help alleviate this issue, none have come close to reaching the overall worldwide popularity of the .com TLD.

However, the landscape of domain name availability is about to change dramatically. The Internet Corporation for Assigned Names and Numbers (ICANN), the entity that oversees a number of Internet-related matters, is set to open up a virtually unlimited number of TLDs. Soon, companies will be able to register TLDs that correspond with their business names and trademarks, such as .disney, .ebay and .microsoft. Additionally, companies will have an opportunity to vie for TLDs consisting of generic terms: .computer, .movie and .pizza. Both will present a world of new Internet marketing options—and, likely, some nightmares.

ICANN has not yet determined exactly how these domains will be made available. However, it is clear that there will be an open application process for those seeking registration of TLDs that correspond with their trademarks. Industry analysts estimate the minimum cost of vanity TLDs (e.g., .nike) could be as much as $50,000-$100,000. Preliminary reports indicate that ICANN is also prepared to set up an auction process to help facilitate the dispersal of coveted TLDs (e.g., .shoe), with the highest bidder receiving the right to a TLD. In these cases, the cost could very easily rise to $500,000-$1,000,000.

Although the new domain registration process has yet to be finalized, it is clear that trademark owners and businesses will face a significant set of challenges. The greatest challenge for most will be deciding if it makes business sense to register TLDs that match certain trademarks and business names. Futher, companies may also wish to seek registration of generic terms, such as .computer, in order to help establish and strengthen their online profile.

Equally important, companies should consider defensive protective registration programs to prevent others from securing certain TLDs. ICANN has indicated that a formal process for objecting to registration of a new TLD based on trademark rights will be made available. But heated disputes are anticipated between parties having concurrent rights in the same TLD, and crafty cyber-opportunists will find ways to subvert such dispute resolution processes.

ICANN is set to meet in November to further discuss the registration and dispute processes for the new domains. The results of this meeting should provide more information regarding the process, including the date for acceptance of open applications. In the meantime, companies should carefully consider the value of seeking new domains.

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